That’s the Way the Cupcake Crumbles: Is the market for the sweet delicacy crashing?

Molly’s. More. Sweet Mandy B’s. Chicagoans may recognize these names as local eateries specializing in the most convenient of small pastries: the cupcake. Though recipes for these treats have been around for hundreds of years, and are a major staple at birthday parties and big celebrations, it was not until the early 2000s when the country started to develop a demand for gourmet cupcakes. You can thank the TV series Sex and the City (of all places!) for that; with the show prominently featuring the popular Magnolia’s cupcake shop, the nation went cupcake crazy. Today, hundreds of gourmet cupcake shops thrive in our city and throughout the country, rallying behind its industry’s largest leader, a New York-based publicly traded company called Crumbs Bake Shop. With mouth-watering flavors ranging from red velvet to cookie dough, you would think this market would continue to thrive off of our taste buds.

Unfortunately, that may not be the case anymore.

Source: The Wall Street Journal

At the peak of its success, Crumbs launched their initial public offering in June 2011 with a strong $13 per share. This past month in mid-April, though, its shares have sunk to $1.70, and they continue to fall at a disquieting rate. Because of this, the company adjusted their 2013 sales forecast from an initial $73 million to an unsettling $57 million. The declining performance of such a huge company as Crumbs has caused some analysts to claim that the market for gourmet cupcakes is beginning to collapse. A recent Wall Street Journal article poses the question, “Is the cupcake bubble that inflated relentlessly over the last decade finally about to burst?”

There are many factors that could have caused this impending cupcake recession. Probably the most apparent of these is the oversaturation of the market. Since the trend began, cupcake making became one of the prime choices for young entrepreneurs to kick-start their small business ventures. This has obviously led to increased competition and a staggering number of locations selling the same product; in Chicago alone, there are nearly three hundred different gourmet cupcake shops. But even these specialty stores have to compete with other establishments like grocery store chains, which are trying to attract the same market with their own cupcake concoctions. With all of this competition, the lines of differentiation start to blur, and it leaves consumers wanting a change of pace.

This change of pace is an additional factor contributing to the cupcake’s demise: consumers are growing tired of the fluffy delicacies and want to indulge in something new. The aforementioned Wall Street Journal article attempted to scour Twitter for the next big tasty treat. Responses differed from gourmet ice cream to mini-pies, but the uncertainty itself is pretty clear. Cupcakes are no longer king, and many successful cupcake shops are starting to feel it in their wallets… and their stomachs.

What do you think is the next big trend in the pastry/delicacy market? Do you think the “cupcake economy” will bounce back, or is it all heading down south from here?


12 thoughts on “That’s the Way the Cupcake Crumbles: Is the market for the sweet delicacy crashing?

  1. Great post. This made of think of my visits to cupcake stores such as Molly’s cupcakes and Sprinkles in Chicago. I recall my first visit to Sprinkles in downtown Chicago. The line extended from the inside to the sidewalks. People were waiting at least half an hour to an hour just for cupcakes. I did not understand why people were willing to wait and pay for an overpriced cupcake. Later, I found out that Sprinkles was a well-known cupcake franchise which targets consumers with its quality and product differentiation. Although,it is important to note that brand name and good word-of-mouth are important factors to the success of a business, the trend in the market is also something to consider. I believe that the next big trend is in healthier delicacies such as frozen yogurt. Not only is the cupcake industry competing with other but they are facing tough competition from other dessert markets. Overall, I think that cupcake economy will bounce back with creative innovation and smart marketing.

  2. I have never heard the word ‘cupcake’ used in the same sentence as ‘recession’ before, but the puns made me laugh. Small businesses drive this city, and I think we will see some bakeries flourish while others fail. I completely agree with the prior comment that this market will bounce back. Cupcakes will never die.

  3. This was a very interesting read and besides making me hungry, this article made me more curious about the future of all desert shops in general. Although I do feel that this market will bounce back, probably in the winter months when people are less health conscious, I don’t feel that this industry will come back with the full strength as it has in the previous years. My reasoning is similar to one of the factors stated in the post that this market has become too saturated and it would be hard for any small business to differentiate themselves because their product is so similar. Furthermore, the fact that these small businesses generally provide their products at a higher prices, people are more likely to go to chain grocery stores being that Americans are still recovering from the recession. Overall, even though I do feel that the cupcake market will not totally collapse, it is my opinion that these types of businesses owners should beware that the cupcake trend may be over.

  4. LoL cupcake recession? Very clever. Reading this actually made me want to go out and actually taste such a delicacy. I’d never even had a “gourmet” cupcake. I definitely think that the “Cupcake Economy” will bounce back. Come on now, this is America. We’ll never grow tired of such a tasty treat.

  5. Interesting post, I never would have guessed the gourmet cupcake industry is declining. You are always seeing new cupcake shops pop up or television shows revolving around the creation of cupcakes appearing on TV. I definitely think with all of this competition it will be difficult for gourmet cupcake shops to succeed, but I don’t think the market is heading completely south. Just like with any product that experiences a lot of competition, these shops will have to find ways to distinguish themselves from others. That may mean simply improving the cupcakes they currently sell, or it may mean having to add a whole new pastry to their products.

  6. I really liked this post, and I’ve been waiting for the day that this was going to happen. I love a cupcake, as much as the next person, but it is nearly impossible to walk down the street in Chicago and not see a cupcake shop. Your point about over saturation is 100% correct, they’re everywhere. I think cupcakes were a cutesy fad, and while the innovators and early adopters may have benefited, those who are just entering the game are doomed. I think this article ties in well with our discussion on product design and the product life cycle. Cupcakes are definitely on their way out.

  7. Being a cupcake addict myself, I’ve been to so many cupcake stores many times. Their cupcakes definitely satisfy my cravings but now, there’s nothing more special than that. I’m tired of eating the same thing over and over again. When my friends ask me, to go to a cupcake store, I’ve never heard of, I am hesitant to go because of the fact that there are way too many cupcake stores and they’re all the same. I’m positive that these cupcake stores will fall behind unless they come up with new flavors or different dessert types. It’s all about creativity. The stores that are able to do this will thrive but will leave many cupcake stores to leave the market. People always want something new and these small or big cupcake businesses will have to keep up with what the customers want, especially when there are stores out there that have bakeries that sell cupcakes for low prices. Either way, cupcakes are definitely losing the interest of many.

  8. This post was very interesting to me because I have actually had this conversation with multiple friends in the past. Like any specialty food, there will always be trends in the market and eventually they will die off. For instance, before the cupcake, frozen yogurt seemed to be the “big” trend and everyone was eating it. Many frozen yogurt shops were popping up everywhere. Now, although there are still frozen yogurt stores, it has definitely scaled down. I am personally a big fan of cupcakes, however feel that the “cupcake economy” is heading down south for sure. Businesses such as the popular Sprinkles Cupcakes, originally started in Beverly Hills, California has now added sprinkles ice cream to their menu because they know the market for cupcakes is fading. I have had crumbs cupcakes and can say they are not the best out there, therefore am not surprised at all at their plummeting stock prices.

  9. Walking through Lincoln Park and Lakeview, I found myself wondering who on earth actually goes to those shops? Well, it’s no surprise to see that these shops aren’t doing too well. I agree with the article that the main culprit is an over-saturation of the market. Cupcakes aren’t exactly a “need”, so not too many shops are going to do well in such businesses. Everyone needs groceries, auto parts, and hardware supplies, so it makes sense to have hundreds of different stores that sell the same thing, but cupcakes? As funny as it is to say, the supply is simply exceeding the demand. There is a cupcake surplus going on right now.

  10. Interesting post. I am personally not a fan of cupcakes and I’ve always thought it was pretty insane to wait in line for over 30 minutes at a cupcake shop to pay for an overpriced cupcake. I think there was great demand for cupcakes when the well-known brands such as Crumbs Bake Shop began opening up new stores. However, just like most products, these cupcakes are becoming unpopular. I think those shops that want to stay in this market need to implement new strategies. As mentioned in previous comments, perhaps cupcake shops that offer more healthy alternatives will begin attracting new customers. In my opinion, another trend that these shops could follow is cupcakes on wheels, which can be translated into making personalized deliveries and/ or driving around the city and stopping at different locations so that people don’t have to walk to shops and instead have the cupcakes come to them (I wonder how this business is doing since I have seen cupcake vans around the city). People nowadays don’t even mind paying a little extra for convenience.

  11. As a cupcake lover myself I think the market isn’t as stable as it was due to their overprice however like mentioned in other comments new strategies need to come in and many shops have already done this by having BOGO specials or happy hours! Also the whole cupcakes on wheels is definitely booming. Many shops have them and like mentioned above, people do pay for convenience!

  12. I am not sure if the Cupcake market will bounce back as it is now. Generation Y is a generation lead through life at warp speed. They typically make the buying decisions in the household and I personally feel that they are the culprits of this decline. They need something new and exciting! They are now looking for the golden cupcake! I will say though that gourmet donuts such as Donut Vault and Glazed and Infused is giving the cupcakes a run for their money!

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